Eric Pickles MP: Smarter procurement in local government could save up to £450 per household

By Communities and Local Government Secretary, Eric Pickles

We all know the frustration of making a purchase, whether a new computer or a new kitchen - and finding out we could have got it cheaper somewhere else. We feel ripped off.

Well some councils going shopping with our tax money are getting ripped off too. And not by a total of £10 or even £10,000. Cutting edge new research was published by industry experts Opera Solutions this week estimates councils could save up to £10 billion by smarter shopping for goods and services. That’s £452 for every household in this country. Or the salaries of almost half a million bin men. Or 650,000 dinner ladies.

We already knew about massive (in some cases up to 745%) differences between what parts of the public sector are paying for the same goods. It happens centrally as well. Under Labour, its bin quango, WRAP, was paying £3.29 for a ream of A4 paper. Meanwhile the House of Lords paid just £1.65. Paper may not sound like much until you consider the office stationery budget for the public sector is £850 million a year.

Opera have looked at spending on energy, mobile phone and legal services across three separate local councils. And they found that of the £13.6 million pounds spent, the councils could shave off £1.44million by using their joint buying power to get the best prices. Opera estimate local government could replicate these kind of savings across a wide range of back office functions, with no impact on quality of service, and wipe 10% to 20% of a total local government procurement spend of £50 billion.

I’m not criticising councils by highlighting these figures – corporate bodies are facing the same challenges on procurement. But attitudes have got to get more commercial. When the recession started to bite, private sector firms tightened their belts and worked to renegotiate prices. Town halls should now do the same.

There are three key bits of advice Opera have advised councils to adopt. Firstly, make much better use of spending data. We’re already urging councils to use the sunlight of transparency to root out incorrect payments, duplication and fraud by publicising their data. The next stage of driving out waste is to make much more intelligent use of this information and compare spending within and across different councils.

Secondly, councils should join forces and bulk buy. This can drive down overheads and secure significantly better economies of scale.

And thirdly, do what everyone does when their funds are tight - shop around. Imagine a council version of The Apprentice. Find the best bargain and negotiate harder on contracts. My own department is cutting its IT bill by 40% by doing some hard-headed renegotiation. It’s time to end over-reliance on a small number of vendors to provide a large numbers of services. Consumers are thinking twice before parting with their hard-earned cash these days – and this should be doubly true for councils parting with taxpayers' hard-earned cash.

There's no doubt councils are facing serious challenges right now to make savings to their budgets as we pay off a toxic legacy of debt. Their spending power has been reduced by £2.6 billion. But instead of panicking and adopting a slash and burn approach to frontline services, the best councils are delivering transformational change by asking big questions about how their services are provided and if they offer value for money. With up to £10 billion in potential savings to be made - there's no excuse for any council to be standing still.

I’m certain that better procurement and joint working would enable councils to afford to offer more frequent and regular rubbish allocations. This is backed up by a report out this week that says joint working would give councils stronger bargaining power when setting up waste contracts and allow for economies of scale, such as in procuring collection fleets. For many people who don’t use other services their council may provide – bin collections are the most obvious and important service they get. And councils owe it to their residents to provide the best possible service.

Take a lead from Dartford where they held a referendum – a Big Bin Vote - on whether to keep their weekly bin collection. When 94.5% of people said yes – they kept it on by achieving savings from a back office shared service agreement with Sevenoaks. Or East Northamptonshire, which has recently negotiated a new waste management contract to be able to offer their residents a weekly collection by eliminating cost.

Every council should be on the front foot about making the best use of taxpayers' money and being truly responsive to their residents’ needs. Localism isn’t just about giving town halls more power. Local people are getting new access to spending data to see where their cash goes. The Localism Bill will give residents a greater voice to hold referendums and powers to challenge basic services. Councils that think they don't need to wake up to this are in for a big surprise. If they don't choose change and smarter spending over cuts, they might find change thrust upon them.